Price and market trends: Europe olefins spot markets grind to a halt

European ethylene and propylene spot markets have ground to a halt, as ongoing weakness upstream is leading to expectations of a decrease in May contract prices, market sources said on 18 April.

Underlying demand for ethylene and propylene is soft, particularly from its key derivatives polyethylene (PE) and polypropylene (PP), but weakening feedstock naphtha prices have reduced consumption to the minimum levels needed.

"If you look at crude, [there is] no pre-buying," an ethylene seller said.

The source added: "Even if you have wiped the floor of the PE silo, they won't be producing more than they have to."

"Everywhere is under pressure, prices dropping so fast and [buyers] holding off consuming, given the very high degree of certainty over [contract price] direction," an integrated player said.

This compares with values in the high $800s/tonne, or about €685/tonne, when the April contract prices were settled.

UPSTREAM INFLUENCE

The vast majority of European ethylene and propylene volume is priced on a monthly contract basis, and upstream developments play a large part in the discussions.

In the current economic climate consumers are living hand-to-mouth, and will further postpone needs if a lower price looks to be on the cards.

"Its very quiet," a trader said, 'there is not much going on.'

A second trader said "with low crude and naphtha, everybody will wait [to commit]".

Sources have mentioned that there is spot ethylene availability ex-Middle East and Mediterranean, and a propylene cargo potentially ex-Brazil. However, traders said there is little appetite from European buyers for such volumes, particularly since the May contract prices are yet to be agreed.

"I got no interest for material when I asked around in Europe," a third trader said, adding it was hard to find buying interest as the "usual suspects" were covered.

"Traders are looking for fixed prices, but this is a bit of a struggle ahead of the [contract price] settlements," the integrated player said.